Case Study: Michelin’s supply chain strategy Essay

Michelin is the forefront of the radial drill as easy as a surpasser on the field run over grocery they occupied almost 20% marketplace apportion in the macrocosm. Itsrealized that the trend towards world(a)ization as more than than intense rivalrys that obtain to lower live and improve the efficient operations. Meanwhile, Michelin birth its strong vision, because they tolerate already essayed a orbicular armorial bearing since 1900s, and built 35 f f arories around the world mingled with 1960 and 1975.Michelin squeeze out be attract the emulous edge in the planetary market done motley manufacturing strategies, refer to (2000, Geoff Buxey) indicates that its generally classify into a some(prenominal) evolve levels, _Domestic, foodstuff access, Low appeal and Global ._Furthermore, in instal to cope with the challenges under several competitions such as Goodyear and Bridgestone, they bewilder place setting a position as successful in the Quality assurance. excessively thither ar comparison and contrast the global operations between Michelin and Bridgestone in the latter sector.Q1. _THE MANUFACTURING STRATEGIES ADOPTED BY MICHELIN IN ORDER TO reach COMPETITIVE ADVANTAGE IN GLOBAL MARKET._Michelin go 69 yield sites in19 countries and their commercially available in 170 countries. This successful is not b atomic number 18ly base on the ability to coordinate the whole entities in the global emerge reach ne 2rk, and likewise depends on their manufacturing strategies to obtain Michael porter (1985) a sustainable Competitive advantage.GLOBALIn 1906, Michelin built its commencement ceremony plant outside of France in Turin, Italy and United States, thats implicated that they buzz off to adopt and access to the international market. More recently, Michelin have dispersion to vi target markets Europe, north-central America, South America, Asia Pacific, China, Africa and the Middle-East.MICHELINS MANUFACTURING STRATEGIES TO SUPPO RT THE COMPETITIVE ADVANTAGESMichelins Tire manufacturing is consist the nature of labor-intensive and capital-intensive, in that locationfore they shoot to adopting opposite strategies between advanced(a) countries and rising countries, mix of _low cos_t and _market access_ strategies to enter into the global market, as (2000, Geoff Buxey) calculates out that the _global manufacturing schema_ is consist of low cost and market access strategy.house servantEurope is the industrial base of Michelin, their harvest-feasts are provides to dickens main markets to the world Original Equipment Market and Replacement market. In Europe, they keen to keep its competitive advantage in providing high technical products and offer a high- tonicity and advanced(a) products and services alike a R&D department act as a major role in providing a never-ending support to their manufacturing strategy. Besides, Increase the productivity can be outright shrivel up their operation cost, as the case mentioned, Michelin hightail it to be through cut down the product size to amplify the productivity in Europe.FOCUS ON HIGH QUALITY & TECHNICAL PRODUCTS PRODUCED IN EUROPE.This is no doubt that, Michelin is spark advanceing in advanced technologies, not only in _Safety_, _Energy efficiency_, but also in _Environmental friendliness_. For instance, increase a low rolling resistance tires for the aspire of reducing vehicle fuel consumption as the public is more consider about environmental friendliness.The powerful evidence to prove that the pure tone of Michelins products are recognized, World trade Magazine to award of producer of Honor to Michelin in 2007, because they provide vehicle tires to U.S. military throughout the world. entrance fee INTO THE EMERGING MARKET AND DIFFERENTIATIONMeanwhile, the augments in the demand of rising market and the y realized that the emigration cost is involves a large lot of their net sales, therefore, establishing a plants in the oversea market and let the issue close to the securities industry, it can not only avoid the ancestry and raptus cost, but also able to encounter the customer postulate nowadays and response to the market change.From the annual report in 2006, there are 3 fields of strategies need to be implement, that including _Differentiation through innovation and expanding upon in emerging countries to stimulate growth_. Martin Christopher (2005) discusses that, in todays marketplace where customers seek individuality and where segments are getting smaller, a major starting time of competitive advantage can be gained by linking production flexibleness to customer need for variety. Its agreed that provides a diversity of products power grab the market share in the emerging market. Moreover, Michelin establishes more plants in different areas can be touching the sharp improvers in demand.SPECIALIZED /focussed FACTORIESTo succeed the major strategic productivity gains, Michelin co ncentration on industrial readiness and specialization of plants. Michelin expect to through _The Michelin Manufacturing Way_ (MMW) to increase their productivity, which is a trouble tool shared by all crowd plants and able to restrict their purchasing costsBesides, owing to cater for item and unique local anesthetic demands, Michelin adopted specialized/focused factories strategy as so to fulfill variouscustomer needs and achieve local customization . Martin Christopher (2005) points out that, centering Factories means limiting the range and mix of products manufactured in a single location the company can achieve vast economies of scale. It bring home the bacons Michelin to make happy lower operation cost because the significant scale economics can be achieved in manufacturing if greater volumes are produced on fewer sites and it release each factory on a specific product range.As a global company, Michelin adopting a different strategy in various markets and fulfill t he customer needs at full steam. Through achieve a products differentiation to trip up the new customer in the emerging market also, they have its strong local presence to adapt to the specific features of the world markets. In addition, further develop the technical products which depend on their ability to offer a high- note and innovative products and services can be maintaining a sustainable competitive advantage in the global market.Q.2 quantify MICHELINS GLOBAL SUPPLY CHAIN MANAGEMENT scheme (GSCM), all ISSUES THEY NEED TO COPING WITH AND PROVIDE RECOMMENDATIONS FOR THE FUTURE DEVELOPMENT.With increased globalization, GSCM strategy is adequate an master(prenominal) issue for Michelin, the flow between and among all firms engaged in offering a good or service to the final customer.FROM upriver TO THE DOWNSTREAM OF THE GLOBAL SUPPLY CHAINGLOBAL SOURCINGThe GSCM in Michelin is truly complicated, because different markets also have its own characteristics in the customer needs and the sales intercommunicate is covering over 170 countries.From the upstream issue orbit, Michelin adopted a _Global sourcing_ as a strategic glide slope to reduce the raw-material cost and mix of themanufacturing inputs available anywhere in the world and gain access to the oversea markets, which supported by The Factor-Input Strategy and The Market-Access StrategyOEMS AND substitutionFrom the downstream supply chain, Michelin have established 11 specialized headache units to monitor and co-ordinate the operation among entities into the GSCM. Besides, they have both different patronage models, OEMs and Replacement market. But its interrelated, because the original equipment sector sales provide make a direct contribution by boosting demand for permutation tires.The tire traders obtain the inventory of new reversal tires through Michelins Distribution Centres and the demand is come from different customers and its less induction than OEMs market. Therefore, the Lead time in the OEMs can be reduced, because the orders are set by the major vehicle shapers in a short completion of time. For instance, Michelin was also OEMs supplier to _General Motors_ and _Hondas_ vehicles Bob Ulrich (2007) until recently. Therefore, these two types of market segments have to using different strategy to control the downstream supply chain. effectual SUPPLY CHAIN AND RESPONSIVE SUPPLY CHAINFisher (1997) suggested two distinctive strategies, Efficient supply chain (ESC) and Responsive supply chain (RSC), and presented a model which links supply chains to products.There are two distinctive supply chain approaches Replacement products represent an ESC and the current of air time is longer, the OEMs products represent a RSC because its able to flexible in handling variance in customer demand.Huang, Uppal et al. (2002) presented a _hybrid supply chain_, edge that some automobile components may contain innovative features, and the hybrid supply chain may theref ore be appropriated in Michelin.Nonetheless, Michelin also tend to integration of the global supply chain network to maximum their favourableness and the core factors to determine their global supply chain strategy is depending on the market and products characteristics.POTENTIAL ISSUES FACING BY MICHELINThe increases in the cost of raw-materials and which are resulting in a negative overall jounce on operating income. The OEMs market is ripening show in advanced market, however, there are growing rapid in emerging market in both OEMs and Replacement, and it has increased 15% tire sales from 60% in 2005 to 75% in 2006 in Replacement market.As the crisply increase the demand in Replacement market, Vollmann(2005) states that the Customer order decoupling point which position in the Finished stages of the supply chain in replacement market, therefore, achieve an optimize inventory and avoid ancestry out is very(prenominal) difficult, meanwhile, product life cycle become shorter a nd the product variety constant increase will force the demand more difficult to forecast.Michelin need to face several potential issues,Increases in the cost of Raw-Material( rubber),OEMs market growing slow,Increases in lead time,Increases in the inventory related- cost,It takes a high cost in transportation because of shipping across boundaries,The supporting activity to develop in the emerging country, especially in technological aspects.Replacement products bring a forecast driven supply chain, the demand is variety and the inventory will be increase continuously, because the lead time is very long, dealers have to make a buffering stock to reduce the jeopardize in stock out, also, a increasing in distribution cost is a considerable issue as well.RECOMMENDATION FOR THE FUTUREVENDOR MANAGED INVENTORY (VMI) PRACTICES AND plumb INTEGRATIONWorking closely with key supplier can be reduce the in-bound lead times, thats allow the upstream supplier supplying and monitoring the inv entory control systems for the downstream parities. There are allow information sharing between both parties, inventory could be replaced by information, the more accurate information you obtain, the less the inventory you hold. Meanwhile, it ensures the raw-material supply inference and the reduction of the procurement cost to offset the increased in the expense of raw-material.The major benefits will be gained from a great deal of reduction in inventory and the reduction of lead time, not only in the ordering processing stages but also in the distribution stages. In addition, although Michelin have its own natural rubber plantations, and there are only supplies a part of the raw-materials, moreover, a dual supplier to reduce the risk in disruption of supplies is necessary.STRATEGIC ALLIANCES WITH THE THIRD-PARTY LOGISTICS PROVIDERS (3PLS)To cope with the increases in the distribution cost, the global tire company decided that outsourcing its distribution network was the right substance to leveraging new capabilities for competitive advantage, because Manufacturing firms and 3PLs can specialize on there area of competences, Thomas A. Foster(2004) points out that, Michelin decided to transform its sexual union America business to TNT in 2004 based on their well local experience. Its suggested that, Michelin can be take the same carry through in the emerging market to directly reduce their operations costs, transportation costs as well as handling costs, additionally, Michelin can increase the cash flow because running a DC will buttoned up a million of dollar.RE-ENGINEERING OPERATIONSActually, OEMs is a best approach to reduce the radical lead time and reduce the inventory as well, therefore, they should more concentrate on this market. Charles J. asserts that manufacturers can obtain the largest decreases in lead times through _re-engineering operations._ Many new terms describe the re-engineered production methods that companies are adopting, for ins tance Just-In-Time manufacturing, lean/agility manufacturing. And there are two major benefits gain from re-engineering operation, Company can use the short lead times to drive down its costs as well as generate increased sales. Nevertheless, before implement this approach, its very important to synchronize and standardize the technological standard so as to pitch the high technical product line to the emerging market.Q 3. COMPARISON AND agate line THE GLOBAL OPERATIONS BETWEEN MICHELIN AND BRIDGESTONEMichelin is a French company and Bridgestone is a Japanese company, both of them also got award in the Fortune global 500 in 2006, former be in 335, and latter ranked in 245. Nonetheless, if based on the market share, Bridgestone is currently ranked as the second company in the global tire market, Michelin is the first.GLOBAL STRATEGYThe global strategy in both companies is very similar they also serving two major markets in the worldwide Original Equipment Market (OEMs) andReplacem ent market. In the previous stage, they strengthen their operation in domesticated market (France and Japan) and gradually access into the different countries and the production belt sack from host countries to new areas.Owing to penetrate the advanced-market such as United-state, Michelin acquires a U.S. tire manufacturers B.F. Goodrich in 1988 and Uniroyal Company in 1990. Meanwhile, Bridgestone acquires the second largest tire manufacturer in United States in 1988 and acquires a US-based Bandag, Inc., in recently. They can directly grab a part of market share in U.S. market, and achieved a synergy effect.To allow an effective to implementation of the global operation, Michelin have establish 11 specialized group services to make sure that they are consistent on a global scale, meanwhile, Bridgestone also have 8 strategic business units (SBUs) to support their global operation, Each SBU has substantial indecorum to focus on satisfying customer needs within the insurance policy framework.GLOBAL SUPPLY CHAINMichelin is adopts a global sourcing strategy in the upstream of the supply chain, in contrary, Bridgestone adopts vertical integration with the raw-materials suppliers and maintain the sources steadily. In the sales networks, there are totally different Michelin through dealer to sale the products, and Bridgestone combines dealer operations together with company-owned facilities, and acquires Bandag, inc., to capture the global network of about 850 franchised dealers in over 86 countries. However, in the distribution network, Michelin have outsourced the U.S. distribution operation to TNT and layoff the own-DCs in 2004, it can reduce the cost directly.LOCATION OF PRODUCTION AND THE TARGET MARKETSThe global distribution network is very sophisticated in both companies, andthere are the comparisons between two companies.The target markets also focus on six geographical areas however, there is little bit difference. Because Bridgestone is a Japanese compan y, therefore, the domestic market (Japan) capture a great deal of percentage of their total sales, in contrary, the total sales of Michelin have 49% is account for Europes business.Generally, their geographic coverage is almost similar, it covering Europe, Japan, North America, South America, Asia Pacific, China, Africa and the Middle-East. In Michelin, the Groups growth in Asia will be significant, and along with the increase volume in demand and they have ability to enhance industrial performance at their plants to achieve cost reduction. But in the Bridgestone, they increase the capital investment in Europe and increase the production capacity in strategic product line while keen to develop in the emerging markets.PRODUCTS DIFFERENCEMichelin represents a leader of advanced technologies in safety, energy efficiency, as well as environmental friendliness. Also, they have offering a tour guide books and online mapping services. In contrary, Bridgestone is emphasis on high-value adde d products and its divided into two types of products, Tires and Diversified Product. Tires account for 80 % of sales in 2006 and the rest is the others._CONCLUSION_Michelin based on persistent strong brands, quality and services, to pursuing a targeted growth strategy that is worldwide, until now, the global footprints has been significant increased, as a leader in an advanced technological and providing high quality products, Michelin need to balance and co-ordination their operation between industrial base countries and the emerging countries for the purposes to maintain a sustainable competitive advantages.In the emerging market, with the sharply increase growth in the replacement sector, Michelin need to concentrate on this sector as well as increase the productivity to fulfill the large volume in demand, meanwhile, the supply chain performance ever is a critical element to achieve the cost reduction as the main objectives in Michelin in recent years is focus on raising their productivity and implementing the cost reduction programs, it enable sufficient to devote for any sharp increases in raw material costs. Last but not least, its recognized that that, Michelin is a very successful tire manufacturer in providing a high quality products and which are beyond to its value._REFERENCES_Martin Christopher (2005), 3rd Ed Logistics and Supply chain management creating Value-adding Networks Great Britain soul Education Limited 2005, p194,p212-213,p235Geoff Buxey, Deakin University, Geelong, Victoria, Australia (2000) Strategic in an era of global competition International Journal of Operaions & Production direction, Vol. 20 NO. 9 2000, pp. 997,1003Vollmann/ pluck/Whybark/Jacobs( 2005), 5th Edition Manufacturing Planning and Control for Supply Chain prudence McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., p.20-21Porter, M. (1985) _Competitive Advantage_, Free Press, New York, 1985.Steermann, H (2003) A practical look at CPFR the Sears Michelin exper ience. _Supply Chain Management Review_, July/ august 2003, pp. 46-53.Fisher, M. L. (1997). What is the right supply chain for your product? _Harvard Business Review_ (March-April 1997), p.105-116.Donald F. Wood Anthony P. Barone, Paul R. Murphy, Daniel L. Wardlow (2002) International Logistics 2nd Edition. AMACOM American Management Associationp.368-371Huang, S.H., M. Uppal, (2002), A product driven approach to manufacturing supply chain selection _Supply Chain_ 11 _Management An International Journal_, Vol. 7, No. 4, pp. 189-200.The Michelin group, Annual Report of Michelin in 2006, pP.4,5,8,16,20,22,25,26, 31-36,43, 49,61The Bridgestone Group, Annual Report of Bridgestone in 2006, pp. 1, 2-7, 10, 13-15, 18-20Fortune Global 500, 2006. From the July 24, 2006 issue online obtainable at http//money.cnn.com/magazines/fortune/global500/2006/full_list/ Accessed 5th November 2007Charles J. Murgiano (no date) Short Lead Times = tall-growing Profits online Available at http//www.waterloo -software.com/leadtime.html Accessed 7th November 2007Thomas A. Foster (2004) The Trends ever-changing the Face of Logistics Outsourcing Worldwide online Available athttp//www.supplychainbrain.com/archives/06.04.3pl.htm?adcode=90 Accessed in 8th November 2007Neil Shister (2007) Manufacturer of the Year for Global Supply Chain rectitude online Available athttp//www.worldtrademag.com/CDA/Articles/Cover_Story/BNP_GUID_9-5-2006_A_10000000000000095846 Accessed in 11th November 2007_Koo, Sunglim(2005) Tire industry strategy online Available at_ _http//www.kumhotire.com/download/TireIndustryStrategy_Aug05.pd f_ Accessed in 20th October 2007Bob Ulrich (2007) What vehicles? O_E tires steal the show in Cleveland_ online Available athttp//www.moderntiredealer.com/t_pop_pdf.cfm?link=research/April%20OE.pdf Accessed in 18h November 2007Africa, the Middle-East, South America and Asia Pacific 16%Europe 49%North America 35%Donald F. Wood Anthony P. Barone, Paul R. Murphy, Daniel L. Wardlow (2002) International Logistics 2nd Edition. AMACOM American Management Association p.368-371US-based Bandag, Inc., a leading manufacturer of tire retreading materials and equipment.